SUMMARY OF TESTIMONY: Senate Housing Subcommittee
S. 2733: "Affordable Housing for Seniors and Families Act"
David Smith, President, Recapitalization Advisors, Inc.
Tuesday, July 18, 2000
Background on Recap
- Recap has directly preserved over 200 properties comprised of 25,000 apartments nationwide.
- Recap works for the real estate because the property needs an advocate.
1. Though painful, M2M is sound policy, but its implementation has been tortuous and it has had many unexpected consequences.
- M2M is painful and hard to do right. But it is strategically desirable, and by now probably irreversible.
- §202 properties need M2M recapitalization. Title I of S. 2733 is good but should go further. Exhibit 1.
- §401 and §402 of S 2733 are logical, indeed desirable, extensions of M2M.
2. Now more than ever, we must preserve our at-risk properties, via renewed affordability.
- More than 100,000 apartments have already left the inventory and the pace is steady if not rising.
- We can renew affordability: out of HUD and in to a new paradigm. This implies preserving entities.
- These new entities fuse mission heart and business head, which are not either/ or choices.
3. In recapitalizing properties, we have to protect current residents.
- Enhanced vouchers work well. They should be extended to apply to old opt-outs. Exhibit 2.
4. Congress must not only reform old programs, it must sponsor new ones.
- Congress has spent five years doing reform. Now we must also create new paradigms.
- With thirty years' experience, we know what works and what doesn't. Exhibit 3.
- §401 and §402 build on what works.
5. §401 matching grants are a necessary adjunct to Congress's overall recapitalization policy.
- §401 rewards states that lead, reduces Federal financial exposure, moves properties to lower debt.
- High debt means only temporary affordability. Low debt enables permanent affordability. Exhibit 4.
- Rents above FMR or so mean §8 for all below 60% of median – subsidy dependency.
- Lower rents means affordability down to 30-40% of AMI. Below that requires §8. Exhibit 5.
6. Congress must also stimulate preserving entities via §402 to preserve at-risk properties.
- About one property a day goes market throughout America.
- Not such hot markets, places like Ogden, UT; Kalispell, MT; Burlington, IA; Keene, NH; Toledo, OH.
- Preserving them requires sophistication and financial resources that many local non-profits lack.
- Most owners are interested in selling portfolios all at once, at fair value, to buyers who close.
- §402 endorses non-profit acquisition intermediaries as a bridge to permanent preservation.
7. Congress must encourage creative innovations in both programs (§401) and entities (§402).
- The inventory's replacement cost is $40-45 billion.
- Many capable entities are trying to preserve properties: CDT, NAHP, NHDC, NR, NHT/ Enterprise.
- NHDC led the development of §410 of HR 202, and now presented as §402 of S 2733.
8. Congress should act now, even if only to authorize experiments.
- Every month that goes by, another 3,000 families face loss of their homes.
David A. SmithRecapitalization Advisors, Inc. Dsmith@recapadvisors.com |
20 Winthrop Square, 4th FloorBoston, MA 02110-1229 July 16, 2000 |
Tel: (617) 338-9484 x215Fax: (617) 338-9422 http://www.recapadvisors.com |